INSURTECH: Innovation Explained

Technological innovation knows no bounds, and such innovation has begun to creep its way into the insurance defense practice. While the days of insurance giants certainly are ongoing, and likely to continue into the future, the headway made by smaller “InsurTech” firms will certainly make an imprint on the way claims are made by the end user and then handled by the insurance defense firm as this decade proceeds.

            InsurTech, a non-discrete combination of the words “insurance” and “technology,” describes the practice of using highly complex algorithms to offer extremely customized insurance policies to users based on data pertaining to trends in the end user’s personal habits as they relate to user’s health, hobbies, lifestyle, travel, etc. Additionally, these customized insurance policies are not necessarily dormant, the technology allows the policies to “learn” more about the users and their driving patterns over time and adjust the policies accordingly. While insurance companies have always collected mass amounts of data from their insureds, InsurTech allows the company to utilize the data more effectively in the following areas:[1]

• Predicting the risk of future losses
• Detecting fraud
• Processing claims

            From 2010-2019, which are generally considered to be the first nine years of InsurTech, approximately $16.5 billion has poured into InsurTech startup companies.[2] The days of an individual calling a local insurance agent and having them set that individual with a policy are coming to an end, as the individual can now pull up an InsurTech company’s smartphone app on their device and have an insurance policy tailored to their specific lifestyle and needs within minutes of opening the app.

            Themis is fortunate to have strong working relationships with two of the largest, budding InsurTech companies, Root Insurance Company and Lemonade Insurance Company. Root Insurance Company, headquartered in Columbus, Ohio, and was launched in 2015.[3] For Root, who exclusively offers motor vehicle insurance, a driving test is required to be taken by its potential insureds which provides the litmus test for coverage and pricing. The theory being that by insuring only “good” drivers, Root will be subject to fewer losses. Lemonade, now available in more than half of the United States, offers expanded categories of insurance including homeowners and pet insurance.

            It is a certainty that algorithmic based insurance policies will have a great impact on the handling of litigation. Use of InsurTech may lead to the days of the attorney becoming a part of the litigation process shortly after the cause of action arises to begin coming to an end, as information pertaining to the user will be highly accessible. Access to InsurTech carrier’s files regarding risk factors associated with an insured may serve to hamper or bolster a defense based on the knowledge of the insured’s driving record.

            An additional consideration, with regard to the use of InsurTech apps which are active while the insured is operating a motor vehicle, will be the ability to record real-time driving information similar to an electronic control module (“ECM”) most commonly used in trucks. Perhaps the app provided by InsurTech companies will be ale to determine speed of the vehicle and braking distance. Such information could serve to benefit both parties in subsequent litigation. For the plaintiff, such information, assuming its discoverability, could provide data proving negligence per se by violating local speed ordinances or failure to maintain proper distance. For a defendant, such data could provide arguments as to safe driving practices and defensive maneuvers taken prior to the accident.

            It is a certainty that a wide array of data collected by InsurTech companies will allow for broad and expansive discovery. There will be no more debating on essential facts, rather both parties will have a file full of pertinent facts to the matter. Having all of the pertinent facts will allow each party to avoid unnecessary litigation as it relates to filing of discovery motions and will allow for a more expeditious and fair trial. Further, more expeditious handling of lawsuits will allow for easier flow of claims and lessened hold up in the resolution of matters.

            InsurTech appears to be the future of claims handling. The ability to take advantage of the array of new data provided by such companies will be critical to the handling of claims once they reach the litigation stage. 

This article was written by Michael Schaer.  Michael is an attorney in the insurance defense practice group of Zarwin Baum’s Pennsylvania office who focuses his practice on the defense of personal injury, property, and professional liability matters.  Zarwin Baum is a founding member of the Themis Advocates Group with offices in Pennsylvania, New Jersey, and Delaware.

Jury Trial During The COVID-19 Pandemic - Myth or Reality

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Federal District Court in Pennsylvania's Apparently Overreaching Decision Opens Door For Business Interruption Coverage

(JANUARY 20, 2021) - The Honorable J. Curtis Joyner, in his decision dated January 8, 2021, in the case of Humans & Resources, LLC, d/b/a Cadence Restaurant vs. Firstline National Insurance Company, 20-CV-2152 (USDC, EDPA) denied the insurer's motion to dismiss the policy holder's declaratory judgment complaint which seeks damages for business interruption losses related to COVID-19 and the stay-at-home orders issued by the Governor of Pennsylvania and the Mayor of Philadelphia. The Court's decision is seemingly overreaching as it ignored the plain unambiguous policy language to allow the policy holder to maintain a claim based on its assertion that it reasonably believed the policy would provide coverage for its losses.

In reaching its decision, the Court acknowledged that the subject "All Risk" policy required that the loss suffered by the business was caused as a result of some actual physical property damage or loss. The Court appreciated that the insured restaurant did not suffer any actual physical loss and that civil authority coverage was not triggered. Moreover, the subject policy contained a virus exclusion that excluded claims for losses resulting from viruses such as COVID-19. To reach its goal-oriented result, the Court applied Pennsylvania's Doctrine of Reasonable Expectations and held that the policy holder's "reasonable expectations" may have superseded the unambiguous policy language and exclusions.

"Under this doctrine, Pennsylvania courts have acknowledged the inherent disparity of bargaining power that exists between an insurer and insured, as well as the complexity of policy terms and conditions in insurance contracts," and that "[t]his dynamic sometimes 'forces the insurance consumer to rely upon the oral representations of the insurance agent' which may or may not accurately reflect the contents of the written document."

Although "in most cases, the language of the insurance policy will provide the best indication of the content of the parties' reasonable expectations," the courts must nevertheless "examine the 'totality of the insurance transaction involved to ascertain the reasonable expectations of the insured.'"

Rational minds must question how a policy holder could have had a "reasonable" expectation that it purchased coverage for the claimed losses when the policy language expressly excluded coverage for those claims and where the Court concluded the policy language was not ambiguous and has been upheld in other cases.

The Court's overreaching decision is disturbing. It was seemingly issued in contradiction with principles of both contract and insurance law. In fact, the Court, expressly stated in its decision that interpretation of contracts is generally an issue of law for the court. We note that the Court did not grant the policy holder summary judgment but merely denied the carrier's motion to dismiss on the pleadings. Consequently, the Court allowed discovery to proceed. Insurers in Pennsylvania and throughout the country must hope that the case is either dismissed at trial or through appeals that will undoubtedly be filed. - (Gallo Vitucci Klar LLP)

BGK Partner Jerry Biondi Obtained A PCA From The Fourth District Court Of Appeals

(JANUARY 21, 2021) - Click here to view BGK Partner Jerry Biondi obtained a PCA from the Fourth District Court Of Appeal Of The State Of Florida affirming his dismissal of a case for a Themis client in Broward County, Florida.  - (Baumann, Gant & Keeley, P.A.)